Will the Fed increase interest rates by 25 bps after the September 2026 meeting?

Prediction markets put the probability at 16%: Will the Fed increase interest rates by 25 bps after the September 2026 meeting. Currently, markets see this as unlikely (16% YES). June 8 (Reuters) - Goldman Sachs expects the U.S.

What’s Happening

Goldman Sachs on June 6, 2026 revised its Federal Reserve outlook, now expecting the central bank to hold the federal funds rate at 3.5%-3.75% through year-end and delay easing until June and December 2027. The shift followed a stronger-than-expected payrolls report and resilient activity data, which the bank said also "lower the bar for a rate hike." Goldman had previously forecast 25-basis-point reductions for December 2026 and March 2027. The pivot aligns with a broader market repricing: futures now imply a near-zero probability the Fed increases interest rates by 25 bps after the September meeting, with the dominant base case being no change. [Kitco, Jun 8]

The policy backdrop has tightened considerably under new Fed Chair Kevin Warsh, who was sworn in last month and convenes his first FOMC meeting next week with headline inflation at a three-year high. Warsh, previously a vocal advocate that the Fed had room to cut, now faces a hawkish data mix: three consecutive 25 bps cuts in 2025 brought the target range to 3.5%-3.75% before the January 2026 pause, and progress on disinflation has since stalled. President Trump has publicly pressed for lower borrowing costs, creating institutional tension as core CPI continues to run above the 2% objective. Steve Forbes characterized the emerging "no cut in 2026" view as a "deadly consensus." [WaPo, Jun 11]

Historically, the FOMC has not raised rates mid-cutting cycle without a clear inflation shock — the last such reversal occurred in 1998, when the Fed hiked four months after easing on LTCM concerns. For the Fed to increase interest rates by 25 bps after the September meeting, analysts say core PCE would likely need to breach 3.5% alongside accelerating wage growth, or a renewed commodity surge tied to geopolitical risk. Goldman's revised path implies a steeper front-end curve and a stronger dollar bid into Q3, while Forbes and other dissenters argue weakening housing and manufacturing data still justify easing. The September 16-17 meeting is the next major decision point; markets are watching the August nonfarm payrolls and CPI prints as the key triggers. [Reuters, Jun 8]

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